Who can utilise Letters of Undertaking (LUT) and Bonds?

1. Eligibility for LUTs:

   • Any registered taxpayer exporting goods or services can use a Letter of Undertaking (LUT).
   • Individuals who have been prosecuted under the GST Act for tax evasion of Rs. 2.5 crores or more are not eligible to provide LUTs.

2. Validity and Renewal:

   • The validity of LUTs is limited to one year, until the end of the financial year.
   • Every financial year, exporters who provide LUTs need to provide new ones.

3. Compliance and Consequences:

   • If the conditions specified in the LUT are not met within the given timeframe, the privileges associated with LUTs are revoked.
   • In case of non-compliance, the exporter is required to furnish bonds.

4. Bond Submission:

   • If exports are made without payment of Integrated Goods and Services Tax (IGST), bonds must be provided.
   • All assesses, including those prosecuted for tax evasion of Rs. 2.5 crores or more under GST legislation, need to provide bonds.
   • LUTs can be provided and submitted online through the GST portal.
   • Bonds must be filled out manually and a hard copy should be sent to the department.

5. Transactions Covered by LUT/Bonds:

   • Zero-rated supplies to Special Economic Zones (SEZ) without IGST payment.
   • Payment of IGST on products exported to countries outside India.
   • Providing services to clients outside of India without paying IGST.

Current Process Under GST (After Implementation):

1. LUT Application and Filing:

   • Before exporting goods or services, a registered taxpayer can apply for and file an LUT online through the GST portal.
   • The LUT is a self-declaration that the exporter gives to the government, stating that they will comply with all GST regulations related to the export transactions and will fulfill the export obligations.

2. Validity and Renewal:

   • The LUT's validity is for one year, until the end of the financial year.
   • Exporters need to renew the LUT every financial year if they wish to continue exporting under its provisions.

3. Transactions Covered:

   • The LUT allows for zero-rated supplies to Special Economic Zones (SEZ) without payment of IGST and also for exports to countries outside India.

Situation Before GST (Pre-Implementation):

1. Manual Submission of RFD-11:

   • Before GST, exporters had to manually submit Form RFD-11 (Application for Refund of Tax, Interest, Penalty, Fees, or Any Other Amount) on their business letterhead in duplicate.
   • One copy was submitted to the Jurisdictional Deputy/Assistant Commissioner having jurisdiction over their principal place of business. The export documents were verified using the ICEGATE system.
   • The other copy was submitted to the Customs clearing authority.

2. Verification and Compliance:

   • The process involved physical submission of documents and verification by both tax authorities and Customs.
   • This process often led to delays and increased compliance costs for exporters.

With the implementation of GST, the LUT process has been streamlined and digitized, making it more efficient and transparent for exporters. The transition from the previous process to the current one aimed to simplify compliance procedures and reduce the burden on businesses.